Media Center

11/20/2024

Company Clashes Brighten Tokyo Bourse on Down Day for Stocks

Bloomberg (11/20/24) French, Alice; Tamura, Yasutaka

Deal makers and activist investors injected drama into the Japanese equity market on Wednesday, triggering sharp rallies in shares of Seven & i Holdings Co. (3382), Tokyo Gas Co. (9531), Kobayashi Pharmaceutical Co. (4967), and Kadokawa Corp. (9468). The gains, which came in the face of losses in the benchmark Topix, underscore just how frenetic trading has become on the Tokyo bourse this year. Within a month of setting a record high in July, the Topix tumbled into a bear market, then quickly bounced back 20% as local and global buyers returned in force. Wednesday’s action saw convenience store operator Seven & i leap as much as 11% on a report that the founding family is looking to complete a deal to take the company private by the end of its fiscal year in February. Tokyo Gas surged 15% at one point after Elliott Investment Management said it now held a major stake in the company and may make “important proposals” to the utility. The move by Elliott Investment is part of an uptick in purchases by activist investors who’ve got traction in taking stakes in companies and agitating for higher returns for shareholders. Kobayashi Pharma jumped as much as 6.4% after Oasis Management Co. increased its stake. Oasis is also reported to have established a minority stake in embattled carmaker Nissan Motor Co., in which Singapore-based Effissimo Capital Management Pte has also invested. The automaker’s stock, which fell 2% Wednesday, jumped 13% on Nov. 12 after Effissimo’s stake came to light. “This is a new characteristic for Japan’s market,” said Tomo Kinoshita, global market strategist at Invesco Asset Management Japan. “Rather than focusing on big exporters, who are at risk if the yen strengthens, more investors are becoming interested in individual stock moves, based on buyout proposals or activism.” Deal-making news also boosted Kadokawa’s shares Wednesday, with Sony Group Corp. in talks to acquire the publisher. Kadokawa’s stock climbed as much as 19%, extending gains from Tuesday. Sony and Kadokawa are among the biggest shareholders in FromSoftware Inc., the developer behind hit games including Elden Ring. A special-purpose company established by Seven & i’s founding family and other parties is working on a plan to conduct a takeover bid for the entire firm, and is looking to raise more than ¥8 trillion ($51.7 billion) from megabanks and US financial institutions, according to Japanese broadcaster NHK. The operator of 7-Eleven stores, in response to the report, said nothing has been decided on closing any deal with the founding Ito family. While the price is still unknown, investors are taking the news positively as the NHK report made a managed buyout seem a real possibility, said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management Co. “Shares are probably rising on expectations that the founding family is serious about this.” Seven & i is considering a management buyout to take itself private with funding from banks, Itochu Corp. and the Ito family in a transaction that could be worth around ¥9 trillion, people with knowledge of the matter said last week. Any deal could be presented as an option for shareholders in the event that Alimentation Couche-Tard Inc. becomes more aggressive with its pursuit of Seven & i and makes a tender offer, the people said. Elliott Investment has acquired 5.03% of Tokyo Gas, it said in a filing to Japan’s finance ministry on Tuesday. The activist investor believes the company should sell properties and real estate projects, including the Park Hyatt Tokyo hotel, that could be worth as much as ¥1.5 trillion combined, according to a person familiar with the matter. Activist funds have been campaigning to unlock hidden value in Japanese companies, many of which are trading below book value. “The key opportunity in Japan is price discovery of undervalued assets, with activists and private market participants being the pre-catalysts for price resets,” said Damian Thong, head of Japan equity research at Macquarie Capital Securities.

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11/20/2024

Funding for Seven & i Founding Family Buyout Will Be Finalized by End of December: Sources

Reuters (11/20/24) Wu, Kane; Uranaka, Miho

Funding for the proposed buyout of Japan's Seven & i Holdings (3382) by its founding family will be finalized by the end of December and will involve Japan's three largest lenders, two people with knowledge of the matter said. Mitsubishi UFJ Financial Group (8306), Sumitomo Mitsui Financial Group (8316), and Mizuho Financial Group (8411) will each provide funding for the buyout, said the people. The operator of more than 80,000 7-Eleven convenience stores around the world is caught in a three-way tug-of-war between a foreign suitor, its founding family, and company management who say their growth plan can enhance value. Earlier on Wednesday, shares in Seven & i jumped following a media report that the founding Ito family was aiming to take the retailer private within this financial year ending in February. Japanese public broadcaster NHK reported on Tuesday that the Ito family aimed to raise more than $51.7 billion to take the company private through a special purpose company, which is in talks with Japan's three largest lenders and major U.S. financial institutions. Seven & i said on Wednesday it was not the source of the media report about the founding family's bid. The company said no decision had been made about proposed deals from the Ito family, Canadian suitor Couche-Tard, or any third party. The shares surged as much as 11% and finished the day up 6.52% at 2,597 yen ($16.68), compared with a 0.16% drop in the benchmark Nikkei average. Alimentation Couche-Tard (ATD), which competes with Seven & i in the North American gas station market, in August made an initial bid to take over the Japanese retail giant. It later raised its offer to $47 billion, in what would be the largest-ever foreign takeover of a Japanese company.

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11/20/2024

Gatemore Capital Calls on UK Pollster YouGov to Explore Sale

Reuters (11/20/24)

Gatemore Capital on Wednesday urged British polling and research company YouGov (YOU) to conduct a review of its business and initiate a sale process. Gatemore attributed the company's share price performance to operational missteps. YouGov's shares have fallen 63.7% so far this year. Some concerns outlined by Gatemore, which has a stake of around 1% in YouGov, include the pollster's failure to provide timely financial forecast and a lack of clarity on achieving mid-term targets. "We are deeply confident in YouGov's fundamental strengths and long-term potential," said Liad Meidar, managing partner at Gatemore. "However, urgent actions are needed now to help the company chart a path towards realizing its intrinsic value." In April, Gatemore had called for British specialty chemicals firm Elementis' (ELM) board to review its operations and replace the CEO amid a fall in the share price.

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11/20/2024

Pfizer Taps Cancer Chief to Lead Research, Find Hit Drugs

Bloomberg (11/20/24) Langreth, Robert; Muller, Madison

Pfizer Inc. (PFE) named oncology research head Chris Boshoff as the drug company’s chief scientific officer while it works to fend off activist criticism that its pipeline is underwhelming. Boshoff’s promotion is the first high-profile C-suite appointment since it became public in October that activist investor Starboard Value had amassed a $1 billion stake in the drugmaker. Boshoff’s replacing longtime R&D chief Mikael Dolsten, 66, whose departure was announced in July. BMO Capital Markets analyst Evan Seigerman said Boshoff “seems like the safe choice.” The drugmaker’s selection of an oncology expert as its science chief underscores its focus on cancer as the most important growth area. Pfizer’s shares were little changed before the markets opened in New York. Pfizer, maker of blockbusters like Prevnar and Ibrance, is racing to find a new big hit after a string of research setbacks. Its efforts to develop an obesity pill have yet to produce much at a time when that field is exploding. A gene therapy for Duchenne muscular dystrophy also failed in a big trial in June. Upping the ante last month, Starboard CEO Jeff Smith publicly accused Pfizer of squandering its Covid successes by overpaying for deals and not coming up with exciting new drug prospects from its own research efforts. Smith has said that replacing Chief Executive Officer Albert Bourla “could make sense.” Pfizer’s stock has lost around half its value over the past three years. Boshoff, 61, has been at Pfizer for more than 11 years. He’ll start overseeing research across the company at the beginning of January and will report directly to Bourla. Boshoff has delivered 24 approved medicines during his time at the drugmaker, according to a Pfizer statement. Before working in the drug industry, he was founding director of the University College London Cancer Institute. Roger Dansey, who joined Pfizer in the $43 billion acquisition of cancer-drug maker Seagen, will serve as interim chief oncology officer and will help Boshoff search for a new head of cancer research, after which he’ll retire.

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11/20/2024

Gildan Nears Debut Canadian Dollar Debt Sale in Two Parts

Bloomberg (11/20/24) Xu, Chunzi

Gildan Activewear Inc. (GIL) is considering selling its first Canadian-dollar bond as soon as Wednesday, according to people with knowledge of the matter. The deal will likely be sold in two parts, with maturities of five and seven years. The five-year note was discussed at 120 basis points above comparable government debt and the seven-year bond at around 135 basis points above, according to the people, who asked not to be identified discussing private matters. The total volume of the debt issued could be around C$700 million ($500 million), one person said. Gildan began marketing the deal on Nov. 15 in Toronto and Montreal. The deal would be the clothing maker’s first loonie-denominated debt sale, according to data from Bloomberg. The company last week received a BBB issuer rating from Morningstar DBRS. Montreal-based Gildan was embroiled in a costly proxy fight earlier this year with shareholders including Browning West LP, an investment partnership. Browning and its allies won control of the Gildan board. The potential debt sale would align with the activist shareholders' strategies for boosting Gildan's stock price. Gildan Chief Executive Officer Glenn Chamandy said in March that he planned to use debt to fund share buybacks.

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11/20/2024

Dye & Durham Pauses Strategic Review Ahead of Annual Meeting and Board Election

Canadian Press (11/20/24)

Dye & Durham Ltd. (DYNDF) says it has paused its strategic review until after its 2024 annual meeting and the election of a new board of directors. The company is facing an attempt by activist investor Engine Capital to replace the board with six of its own nominees and take control at the shareholder meeting set for Dec. 17. Engine Capital has accused the company's existing directors of overseeing poor returns and failing to hold management accountable. Dye & Durham says it has received significant interest regarding its strategic review, but the board decided to pause the process in light of the activist situation and in response to feedback from shareholders. The company has nominated its own slate of seven directors, including chief executive Matthew Proud and current board chair Colleen Moorehead, for election at the annual meeting. Moorehead says the board and management look forward to executing on its value creation plan, and following the annual meeting, will remain open to all value creation opportunities for shareholders including a sale of the company.

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11/20/2024

News Corp Says Investors Reject Proposal to End Dual Class Voting Structure

Reuters (11/20/24)

News Corp (NWSA) said on Wednesday that investors rejected a proposal by Starboard Value to break the Murdoch family's grip on the publisher by ending a dual class voting structure. The company said the hedge fund's non-binding shareholder resolution fell short of securing the number of votes needed to pass at today's annual meeting. The Murdoch Family Trust owns more than 40% of the voting shares. Starboard won support from powerful proxy advisory firms and a number of other investors who argued that good corporate governance dictates each share should have one vote.

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11/20/2024

Tokyo Gas Shares Rise Sharply After Elliott Builds Stake

Wall Street Journal (11/20/24) Narioka, Kosaku

Tokyo Gas (9531) shares rose sharply after Elliott Investment Management disclosed that it built a stake in the utility company, the latest move by an activist investor targeting Japanese companies. Shares rose 13% on Wednesday in Tokyo. In a filing released after Tuesday’s market close, Elliott said it acquired a 5.0% stake in the company, adding it might make significant proposals to Tokyo Gas following discussions with company officials. Activist investors, once shunned by Japanese management, have become increasingly prominent in the Japanese market as the government pushes companies to communicate better with investors as part of efforts to spur investment in Japan and revitalize the market. Elliott said Tuesday that it invested 64.96 billion yen, equivalent to $420 million, in Tokyo Gas. The filing showed that the hedge fund had purchased shares almost every trading day in October. Wednesday’s jump in the Tokyo Gas stock added to sharp gains since late October triggered by the announcement of a share buyback. Shares have risen 33% this year, though they still trade below their book value. On Oct. 30, Tokyo Gas announced plans to repurchase up to ¥40 billion worth of its own shares after reporting a drop in revenue and net profit for the first half ended Sept. 30. The utility company also said it would accelerate the sale of properties and stockholdings to fund growth initiatives or return cash to shareholders. A number of Japanese companies have increased their dividends and stepped up share buybacks after the Tokyo Stock Exchange last year called on listed companies to improve returns on shareholders’ capital and correct discounts reflected in their share prices.

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11/19/2024

Salesforce Plans Layoffs at Acquisition Own in Strategy Shift

Bloomberg (11/19/24) Ford, Brody

Salesforce Inc. is planning to cut workers at Own, the data management startup it acquired for about $2 billion. Some roles will not be required “post harmonization,” Salesforce told workers of Own in a presentation this week. The end date will be Jan. 31 for employees in those positions. Some other jobs will be “transitional” and needed for three to 12 months to support the integration on a fixed short-term basis, the company said in the presentation. Salesforce, the top maker of customer relations software, announced the deal in September. Own said Monday on LinkedIn that the acquisition had closed. A Salesforce spokesperson declined Tuesday to comment on the workforce reductions. The immediately planned job cuts underscore Salesforce’s tighter approach to acquisitions after years of rapid expansion. Big mergers like Slack in 2021 or Tableau in 2019 added thousands of workers to overall headcount, fueling expenses and technical complexity. Salesforce’s penchant for growth through deals came under fire from activist investors starting in late 2022, leading the company to make changes such as disbanding its mergers and acquisitions committee and cutting 10% of its workforce early last year. San Francisco-based Salesforce has said it would take a more prudent approach to future purchases. Own, which focuses on securing data across software applications, is Salesforce’s biggest acquisition since Slack. The $1.9 billion merger includes about 1,000 workers at Own, according to a person familiar with the firm who asked not to be named discussing internal numbers. Most analysts see Own bolstering Salesforce’s Data Cloud offering, which helps customers organize and analyze information across apps. Separately, Salesforce said earlier this month that it would be hiring more than 1,000 people to help sell its new generative AI agent product.

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